Thursday marked a remarkable rally for U.S. crude oil, propelling to its highest level in three months. This phenomenon was a striking defiance of a bearish supply and demand outlook from the International Energy Agency, bouncing back resolutely from the preceding session’s losses that were primarily driven by an oversized build in domestic crude inventories.

The catalyst for this remarkable surge was U.S. retail sales data, which revealed a larger-than-expected decline in January and subsequently sparked a significant selloff in the dollar. The renewed optimism over potential interest rate cuts from the Federal Reserve has injected a fresh wave of positivity into the oil market, as it could potentially boost oil demand.

A weaker dollar always tends to serve as a tailwind for oil prices, underscoring the truism that it makes the commodity cheaper for holders of other currencies.

In its monthly report, the IEA reaffirmed its estimate of 1.2M bbl/day for 2024’s oil demand growth while simultaneously projecting a rise in supply by 1.7M bbl/day, an upsurge from its previous forecast of 1.5M bbl/day. However, Manish Raj, managing director at Velandera Energy Partners, emphasized the skepticism toward IEA’s downbeat forecast, asserting that traders are more inclined to embrace OPEC’s report, which painted a much rosier picture for demand, as reported by MarketWatch.

Front-month Nymex crude (CL1:COM) for March delivery concluded its remarkable ascent by closing at a commendable +1.8% to $78.03/bbl. This marks its eighth gain in nine sessions and the highest settlement since November 14. On the other hand, front-month April Brent crude (CO1:COM) notched up a gain of +1.5% to $82.86/bbl, securing its seventh increase in nine days and soaring to its highest level since late January.

ETFs such as (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), and (USOI) are expected to feel the positive reverberations of this upward surge. The energy sector, especially (NYSEARCA:XLE), surged to the top of the day’s S&P sector leaderboard by +2.8%, with Targa Resources (TRGP) climbing by +5.6% after surpassing Q4 adjusted EBITDA estimates and Diamondback Energy (FANG) by +5.1%, reaching an all-time high of $179.53.

ANZ Research forecasts a further rise in crude prices, expecting them to soar above $90/bbl later this year. This optimism is rooted in the belief that broadly negative market sentiment should prompt OPEC to extend its current production cuts into Q2.

“We see the market largely balanced in the current quarter and expect fundamentals to improve as demand recovers,” ANZ stated, further emphasizing that OPEC’s currently high levels of spare capacity are effectively acting as a safeguard against rising geopolitical concerns about supply disruption.